STATE POWER AND INTERNATIONAL TRADE 321 either theoretically or empirically.On the one hand,writers from the mercantilists through the American protectionists and the German historical school,and more recently analysts of dependencia,have argued that an entirely open system can undermine a state's effort to develop,and even lead to underdevelopment.On the other hand, adherents of more conventional neoclassical positions have maintained that exposure to international competition spurs economic transforma- tion.'The evidence is not yet in.All that can confidently be said is that openness furthers the economic growth of small states and of large ones so long as they maintain their technological edge. FROM STATE PREFERENCES TO INTERNATIONAL TRADING STRUCTURES The next step in this argument is to relate particular distributions of potential economic power,defined by the size and level of development of individual states,to the structure of the international trading sys- tem,defined in terms of openness. Let us consider a system composed of a large number of small,highly developed states.Such a system is likely to lead to an open international trading structure.The aggregate income and economic growth of each state are increased by an open system.The social instability produced by exposure to international competition is mitigated by the factor mobility made possible by higher levels of development.There is no loss of political power from openness because the costs of closure are symmetrical for all members of the system. Now let us consider a system composed of a few very large,but unequally developed states.Such a distribution of potential economic power is likely to lead to a closed structure.Each state could increase its income through a more open system,but the gains would be modest. Openness would create more social instability in the less developed countries.The rate of growth for more backward areas might be e See David P.Callco and Benjamin Rowland,America and the World Political Economy (Bloomington:Indiana University Press 1973),Part II,for a discussion of American thought;Eli Heckscher,Mercantilism (New York:Macmillan 1955);and D.C.Coleman,ed.,Revisions in Mercantilism (London:Methuen 1969),for the classic discussion and a collection of recent articles on mercantilism;Andre Gunder Frank, Latin America:Underdevelopment or Revolution (New York:Monthly Review 1969); Arghiri Emmanucl,Unequal Exchange:A Study of the Imperialism of Trade (New York:Monthly Review 1972);and Johan Galtung,"A Structural Theory of Imperial. ism,"Journal of Peace Research,vul,No.2 (I971),81-117,for some representative argu- ments about the deleterious effects of free trade. 1 See Gottfried Haberler,International Trade and Economic Development (Cairo: National Bank of Egypt 1959);and Carlos F.Diaz-Alejandro,"Latin America:Toward 2000 A.D.,"in Jagdish Bhagwati,ed.,Economics and World Order from the 1g7os to the rogos (New York:Macmillan 1972),223-55,for some arguments concerning the benefits of trade.STATE POWER AND INTERNATIONAL TRADE 321 either theoretically or empirically. On the one hand, writers from the mercantilists through the American protectionists and the German historical school, and more recently analysts of dependencia, have argued that an entirely open system can undermine a state's effort to develop, and even lead to ~nderdevelopment.~ On the other hand, adherents of more conventional neoclassical positions have maintained that exposure to international competition spurs economic transforma￾ti~n.~The evidence is not yet in. All that can confidently be said is that openness furthers the economic growth of small states and of large ones so long as they maintain their technological edge. FROM STATE PREFERENCES TO INTERNATIONAL TRADING STRUCTURES The next step in this argument is to relate particular distributions of potential economic power, defined by the size and level of development of individual states, to the structure of the international trading sys￾tem, defined in terms of openness. Let us consider a system composed of a large number of small, highly developed states. Such a system is likely to lead to an open international trading structure. The aggregate income and economic growth of each state are increased by an open system. The social instability produced by exposure to international competition is mitigated by the factor mobility made possible by higher levels of development. There is no loss of political power from openness because the costs of closure are symmetrical for all members of the system. Now let us consider a system composed of a few very large, but unequally developed states. Such a distribution of potential economic power is likely to lead to a closed structure. Each state could increase its income through a more open system, but the gains would be modest. Openness would create more social instability in the less developed countries. The rate of growth for more backward areas might be See David P. Calleo and Benjamin Rowland, America and the World Political Economy (Bloomington: Indiana University Press r973), Part 11, for a discussion of American thought; Eli Heckscher, Mercantilism (New York: Macmillan 1955); and D. C. Coleman, ed., Revisions in Mercantilism (London: Methuen 1969), for the classic discussion and a collection of recent articles on mercantilism; Andre Gunder Frank, Latin America: Underdevelopment or Revolution (New York: Monthly Review 1969); Arghiri Emmanuel, Unequal Exchange: A Study of the Imperialism of Trade (New York: Monthly Review 1972); and Johan Galtung, "A Structural Theory of Imperial￾ism," lournal of Peace Research, VIII, No. 2 (1971), 81-117, for some representative argu￾ments about the deleterious effects of free trade. 7 See Gottfried Haberler, international Trade and Economic Development (Cairo: National Bank of Egypt 1959); and Carlos F. Diaz-Alejandro, "Latin America: Toward 2000 A.D.," in Jagdish Bhagwati, ed., Economics and World Order from the 1970s to the rggos (New York: Macmillan 1g72), 223-55, for some arguments concerning the benefits of trade